38 hospitals sue HHS over site-neutral payment rule


Hospitals named in the suit include Vanderbilt Medical Center, Atrium Health, Rush University Medical Center, Ochsner Clinic Foundation, Montefiore.

A month and a half after several hospital advocacy groups joined together to sue the U.S. Department of Health and Human Services over it’s finalized site-neutral payment policy, 38 hospitals have followed, filing suit against HHS Secretary Alex Azar for a policy they say will deprive hospitals of hundreds of millions of dollars and could compel them to cut patient services due to loss of reimbursement.

The complaint argues that medical services provided in hospital outpatient departments are more “resource-intensive”–and therefore more costly–than those performed in an independent physician’s office. It also sharply criticized Secretary Azar, saying he “has blatantly disregarded a specific and unambiguous statutory directive, acted well beyond his authority and nullified that statutory exemption” that would have had hospital outpatient centers reimbursed for services at the higher grandfathered rate previously legislated.

The hospitals suing include Vanderbilt Medical Center, Atrium Health hospitals, Rush University Medical Center, Ochsner Clinic Foundation, Montefiore Health System and many others.


The outpatient prospective payment system seeks to equalize what physician offices and hospital outpatient departments are paid for certain clinical visits, a change that will be phased in over two years. The new rule cuts payments for hospital outpatient clinic visits at off-campus provider- based facilities in order to level them out against what is paid to physician offices. Half of the total reduction, $380 million, will take effect in 2019 and the remaining cuts will be phased the next year.


The Bipartisan Budget Act of 2015 amended the Social Security Act such that Medicare pays the same rates for medical services regardless of whether they are provided in a physician’s office or in an “off campus” hospital department. At the time, Congress provided an exemption from the rule for all off-campus hospital outpatient departments that were providing services before the enactment.

The AHA, in the suit they are part of, said the Azar’s reversal on the grandfathered exemption exceeds the administration’s legal authority. The AHA previously called the OPPS final rule  “unsupportable analyses and erroneous policy rationales,” and said it will have “negative consequences” for patients, with those in rural and vulnerable communities getting hit especially hard. The AHA and other hospital associations are already challenging the 340B policy included in the current outpatient rule.


“The Secretary’s unlawful rate cut directly contravenes clear congressional directives and will impose significant harm on affected off-campus hospital outpatient departments and the patients they serve. Accordingly, this Court should declare the Secretary’s Final Rule to be ultra vires and enjoin the agency from implementing any payment methodology other than OPPS rates for all E/M services provided by excepted off-campus PBDs,” the complaint states.

Mark Polston, a partner with King & Spalding, the firm representing the plaintiffs: “Our clients’ mission is to provide high-quality healthcare. They have relied for years upon their off-campus departments to expand access to care and bring hospital services directly to their communities, many of which are underserved by other providers. Congress preserved their ability to do that work when it excepted them from the changes contained in Section 603 of the Bipartisan Budget Act of 2015. But the Secretary overstepped his bounds when he took that away. We are asking the court to reinstate the decision Congress made to preserve our clients’ ability to bring the best possible care to their patients.” Mark Polston, a partner with King & Spalding, the firm representing the plaintiffs:




Trump budget seeks savings through ObamaCare repeal


Trump budget seeks savings through ObamaCare repeal

The White House budget for fiscal 2019 seeks major savings by repealing ObamaCare and endorsed a Senate GOP bill as the best way to do so.

“The Budget supports a two-part approach to repealing and replacing Obamacare, starting with enactment of legislation modeled closely after the Graham-Cassidy-Heller-Johnson (GCHJ) bill as soon as possible,” the White House said in its budget request.

The legislation from Sens. Lindsey Graham (R-S.C.), Bill Cassidy (R-La.), Ron Johnson (R-Wis.) and Dean Heller (R-Nev.) would replace ObamaCare with a series of block grants to states.

The budget proposes over $90 billion in savings over 10 years if the policies in the Graham-Cassidy bill were enacted. Combined with other provisions like Medicaid changes, the White House projects there would be nearly $675 billion in savings over a decade tied to repealing ObamaCare.

Advocacy groups were quick to denounce the proposal, which is unlikely to gain traction in Congress.

“By asking Congress to revive the deeply unpopular Graham-Cassidy repeal bill that ended protections for Americans with pre-existing conditions, gutted Medicaid, ripped away coverage from millions, and raised costs for millions more, while also proposing drastic cuts to Medicare, Trump has chosen to ignore the American public’s overwhelming preference for a bipartisan path forward on health care,” said Protect Our Care campaign director Brad Woodhouse.

Republican leaders have signaled that they are not interested in diving back into the contentious ObamaCare repeal fight this year. The Senate last year failed to pass a repeal bill, and there is no indication that the votes have shifted since then.

A number of Republicans have even discussed taking bipartisan actions to stabilize ObamaCare markets and try to bring down premiums through actions such as funding known as reinsurance.

Graham has said he will continue fighting for his bill and is not completely alone. Sen. Ted Cruz (R-Texas) is also calling for Congress to not give up on repeal this year.


Among Those Who Want to Lower Drug Prices, Cacophony, Not Consensus


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Everyone seems to want lower drug prices. 5 reasons why that hasn’t happened.

Of all his campaign promises, President Trump’s vow to bring down drug prices was perhaps the most popular.

An assortment of interest groups spoke out loudly and passionately on the need for action, from hospitals to doctors to insurers to generic drug makers to patients themselves.

And in many ways, they seem to have the clout, and resources, to counter drug makers’ slick ad campaigns and lobbying firepower. Last year, the American Medical Association, America’s Health Insurance Plans, and the American Hospital Association together spent more than $45 million lobbying Congress, almost twice what the drug makers’ group, PhRMA, spent in the same time period.

Instead, congressional efforts to lower drug prices are at a total standstill. In interviews with STAT, lobbyists, lawmakers, and congressional staffers, Republicans and Democrats alike, said the most powerful health industry players conspicuously disagree about exactly how to move forward. Every group pushes its own priorities and strategies — a cacophony that makes it unlikely that crushing drug prices will change any time soon.

“They all say, ‘Yes, we should [lower drug prices], and someone else is responsible for it,’” Sen. Patty Murray of Washington, the top Democrat on the Senate Health, Education, Labor, and Pensions Committee, told STAT. “Everybody needs to come to the table and say what can my industry do, what can pharma do. … That will be how we solve this.”

Solving it, however, seems a stretch when just addressing it has gone nowhere. Despite President Trump’s insistence, on the campaign trail and in office, that he will lower drug prices, there has been no major federal effort to do so in the first year of his administration.

The disarray was on full display at a recent congressional hearing, when representatives from nearly every major trade group with any stake in the country’s drug prices — AMA, AHIP, and AHA included — spent almost an hour and a half testifying without more than a cursory discussion of how Congress could fix the problem. When they finally did talk solutions, outside of buzzy phrases like “increase transparency,” almost none of their answers matched.

So why can’t the broader health care industry agree on how to make drugs more affordable? Here are five factors.

1. Health care lobbyists are stuck playing defense.

When it comes to drug pricing, hospitals, insurers, and PBMs in particular have spent the last year fending off congressional inquiries into their own business practices — leaving little time to go on the offensive.

Meanwhile PhRMA has alternately pointed at hospitals, insurers, and PBMs as the profiteers in the current system.

It’s “lobbying 101, to muddy the waters,” according to Rep. Peter Welch (D-Vt.). And in the complicated world of drug pricing, it’s an effective strategy.

Drug makers’ efforts to vilify PBMs and to demand more transparency about their role in the supply chain are well-documented. The Washington Post earlier this year called pharma’s tactics against those players an effort to “start an industry war.”

They’ve opened a similar front against insurers, ramping up rhetoric and backing new patient groups that decry how higher deductibles and copays mean steeper costs for consumers, even when list prices don’t change much.

And they’ve accused hospitals of marking up the price of drugs and pocketing the difference, both in general and specifically as part of a push to overhaul the hot-button 340B drug discount program.

“That disarray you talk about, it’s not accidental,” Welch said. “The flames of that are fanned by pharma, [which] is doing everything they can to create confusion about what’s the right remedy,” he said.

The problem, according to Walid Gellad, who leads the University of Pittsburgh Center for Pharmaceutical Policy and Prescribing, “is that every part of the industry says things that are correct. It is correct that one of the reasons patients are feeling such high prices is because they have to pay coinsurance and big deductibles,” Gellad said, noting that pharma’s concerns with the PBMs and hospitals had some validity, too. “And it’s true that pharma sets the list prices high. They do do that.”

PhRMA spokesman Robby Zirkelbach also said there was a reason for lawmakers’ interest in so many players: the validity of the concerns. He pointed to data that showed slowing growth of prescription drug prices and increasing copays and deductibles.

“There’s no wonder that people are continuing to dig into this issue, and what they’re realizing is that to really be able to address the drug pricing concerns that people have raised, you’ve got to address some of the misaligned incentives in the system,” he said. “This is a complicated system, and we’ve got to look at how money flows across the system.”

And the tactic has successfully diverted lawmakers’ attention. Republicans in both chambers of Congress have held hearings in the past year looking at the “supply chain” that goes into the cost of drugs — broadening their spotlight from the companies that set the price to the other actors that can impact it. And lawmakers on both sides of the aisle say they want to better examine the vast array of players before they make any sudden policy moves.

“There are some that zero in on just one piece of the cost curve, so what I’m trying to do on the committee is look methodically at every piece,” Rep. Greg Walden, the Oregon Republican who chairs the influential Energy and Commerce Committee, told STAT. “We’re going to look at PBMs, we’re going to look at hospital costs, we’re going to look at what insurance costs. We’re going to look top to bottom.”

2. Congress isn’t jumping to act.

Beyond hearings, Congress hasn’t actually shown great appetite to tackle drug pricing. And that lethargy can dampen lobbyists’ enthusiasm to throw their weight and resources behind a given campaign or piece of legislation.

One physician lobbyist called it a “chicken and the egg” problem, wondering whether it would be Congress or the industries to first signal their motivation to act.

Case in point: the so-called CREATES Act. It’s one of the few pieces of drug price legislation that has the support of hospitals, insurers, doctors and a whole host of other groups and companies. But it’s languishing on Congress’s to-do list.

The bill, like its counterpart, the Fast Generics Act, takes aim at what supporters call delay tactics that drug makers use to keep generic competitors off the market. The legislation would give generic manufacturers that are legitimately seeking product samples the right to sue the drug makers if they refuse to hand over those samples.

It’s a small but meaningful change — the Congressional Budget Office has estimated that the legislation could save Medicare, Medicaid, and other federal government health programs more than $3 billion over 10 years.

And industry has been pushing the legislation, albeit without the same urgency that’s animated other priorities. Together, many of the trade associations — along with some three dozen other groups and companies, including Walmart, CVS, and AARP — formed a coalition, the so-called Campaign for Sustainable Rx Pricing, to push the bill. They hired a handful of lobbyists who are largely focused on the issue, too, to the tune of $440,000 over 2017.

But as one supporter put it, “it’s kind of telling that it has to be such an egregious abuse for everyone to coalesce.”

So far, drug makers have blocked attempts to include the measure in the 21st Century Cures Act that passed in 2016 or in last year’s reauthorization of FDA user-fee agreements, a priority for the drug industry. They say the bill will weaken protections for patients and spur “meritless, wasteful litigation.”

Supporters were nonetheless optimistic about the path forward for the bill. Several lobbyists backing the effort, along with staffers in both the House and Senate, told STAT there is momentum on Capitol Hill to include the measure in an upcoming spending package since it could help offset some other spending.

3. Each industry has very different priorities, even when they do agree.

Even when they do agree — as on CREATES, for example — health industry lobbyists don’t always prioritize the same issues. Some may have spent 2017 more focused on the repeal and replace of the Affordable Care Act than drug pricing. Others might have they used their meetings with lawmakers to defend a tax credit. Or perhaps some argue for other, more important drug pricing policies that need to be tackled first.

“When you work with these other groups, they rank [policy proposals] differently. There are certain things they want first. So it’s not only about finding solutions you can agree on, but about which ones you want to do first,” one patient advocate told STAT.

Drug makers, on the other hand? Pricing is their primary concern.

Other groups “have their own fish to fry, their own priorities,” said David Mitchell, the founder of the patient group Patients for Affordable Drugs. For drug companies, “it’s their number one issue: drug pricing. All the rest of them have their own number one issues, and drug prices aren’t it.”

4. All the major players have a stake in the status quo.  

Academics had another easy explanation for the lack of consensus — and the lack of concerted effort — from health care industry groups that profess an interest in lowering drug prices. They all profit from the current system.

Hospitals are paying more for drugs for patients admitted to the hospital, but on the flip side, at least some facilities are profiting from reimbursements for drugs in outpatient settings and in their own specialty pharmacies, according to Peter Bach, the director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes. PBMs also earn bigger rebates if the list prices are higher. And doctors, too, make more money under Medicare rules if they administer a more expensive drug to a given patient.

“People are paying these bills and the pie is getting bigger. Everyone’s arguing about where the knife comes in and cuts the slices of pie,” he said. “Everybody thinks everybody else is getting an unfair share.”

Gellad agreed.

“Everyone is making a lot of money. No one’s gone broke. So they don’t want to change things,” he said. “And that’s why the industry is not going to all agree to do something [on drug prices], because they’d all have to agree to lose money. Why would anyone agree to do that?”

5. There’s no silver bullet.

It’s not as if there’s one easy solution, ripe for the picking, if only groups could agree on it, several trade association officials told STAT. The piecemeal approach — getting behind policies like CREATES and then turning to other, smaller issues — may be the best way to approach the issue, they argued.

Similarly, lawmakers said there’s no one fix.

“The reason you haven’t seen all of the groups coalesce around one proposal — it’s not really clear what the solution is at this point because it’s such an opaque process,” Rep. Diana DeGette (D-Colo.) told STAT. “It’s hard to see what one solution there would be.”

Mitchell, along with a spokesman for the Association of Accessible Medicines, which represents generic manufacturers, also pointed to growing consensus behind smaller, targeted policies that would keep branded drug manufacturers from “gaming the system” — policies like CREATES and other changes to the patent system that could garner broader support. They each noted, too, that newly confirmed Health and Human Services Secretary Alex Azar, himself a former drug company executive, had voiced support for those changes during confirmation hearings.

They also preached patience. Bach, a former senior adviser to the Centers for Medicare and Medicaid Services, likened the push to the decades of jockeying between various environmental groups over fossil fuel regulation.

“Environmental regulation is a classic example of this,” Bach said. “You have this broad array of interested parties that would like to see movement, but the flavor of the movement they want, the ranking of their priorities, it’s not ‘one and only,’ even if it’s top [priority] — against a highly concentrated entity that specifically has a single agenda counter to it, with deep influence. That is a very hard row to hoe.”

“We are making progress,” he added. “But we get there in fits and starts.”

More than 50 groups push Congress to extend Medicare programs


More than 50 groups push Congress to extend Medicare programs

More than 50 health-care organizations are urging Congress to quickly pass a package of Medicare extenders, ideally in an upcoming short-term spending bill, arguing the delay could hurt seniors.

“Now that we are well into 2018, Congress’ inaction on these important Medicare policies could mean real harm to the vulnerable patients we serve,” the groups, including the Caregiver Action Network, Medicare Rights Center and National Partnership for Hospice Innovation, wrote in a letter sent Friday to Republican and Democratic leaders.

Several Medicare programs expired last year. Other health-care programs in need of a long-term funding renewal include special diabetes programs and the community health centers that serve the nation’s most vulnerable.

The last stop-gap spending bill came on the heels of a three-day government shutdown and included funding for the Children’s Health Insurance Program. Senate Majority Leader Mitch McConnell (R-Ky.) predicted Thursday that the government wouldn’t shut down again, as Congress will race to keep the government’s lights on when it returns next week.

Short-term funding legislation hasn’t been released, and it’s unclear if extensions of health programs will make it into the final product.


Health Care for Millions at Risk as Tax Writers Look for Revenue


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The Republican tax plans are suddenly looking a lot more like health-care bills, with provisions that may affect coverage and increase medical expenses for millions of families.

The House version of the tax bill, which President Donald Trump endorsed on Tuesday, would end a deduction that allows families of disabled children and elderly people to write off large medical expenses. The Senate plan would repeal the Obamacare requirement that most Americans carry insurance, a move that insurers promise would raise premiums in the nationwide individual insurance market.

The provisions would help offset the cost of large tax cuts for corporations and individuals. But the move has sparked a new wave of opposition from the health-care industry and others who are concerned about its impact — the same political headwinds that tanked Republican efforts to repeal the Affordable Care Act earlier this year.

Either proposal, if signed into law, “could be devastating for some families with disabilities,” said Kim Musheno, vice president of public policy at the Autism Society, a Bethesda, Maryland, organization that advocates for people with autism. “Families depend on that deduction. And if they deal with the individual mandate, that’s going to cut 13 million people from their health care,” she said, citing a Congressional Budget Office estimate.

Republicans and some conservative groups, though, argue that removing the penalty for uninsured individuals would represent a tax cut for many low-income people who pay it now. Americans for Tax Reform, the group led by anti-tax crusader Grover Norquist, said that Internal Revenue Service data from tax year 2015 show that 79 percent of households that paid the penalty earned less than $50,000 a year.

Most Americans already think the tax legislation is designed to benefit the rich and oppose the bill by a two-to-one margin, according to a Quinnipiac University poll released on Wednesday. The survey was conducted between Nov. 7 and Nov. 13 — before the repeal of the Obamacare mandate was introduced — and has a margin of error of 3 percentage points. Some of the details in both tax plans have changed since the survey, and the Senate tax-writing committee is still working on its draft.

Republican Concerns

Few Republicans have spoken out about the House bill’s repeal of the medical-expense break. The bill faces a vote on the House floor Thursday. But some criticism has begun to surface as advocacy groups including the AARP and the American Cancer Society have highlighted the harm the House bill could have on families battling diseases and on the elderly. People with tens of thousands of dollars in annual medical expenses often rely on the tax deduction to make ends meet.

Representative Walter Jones, a North Carolina Republican, said Wednesday he’ll vote against the House bill in part because it eliminates the deduction for out-of-pocket medical expenses.

“There are a lot of seniors in my district and this is life and death for them,” he said.

The deduction is allowed under current law if medical expenses exceed 10 percent of a taxpayer’s adjusted gross income. Almost 9 million taxpayers deducted about $87 billion in medical expenses for the 2015 tax year, according to the IRS.

Representative Greg Walden, an Oregon Republican who chairs the Energy and Commerce Committee, said some of his constituents who live in expensive elder-care facilities could be harmed if the deduction is scrapped.

“I think it’s one we have to continue to massage a bit,” he said. “There’s a lot of things out there and there’s maybe going to be an opportunity to adjust some of them.”

He declined to elaborate.

Obamacare Repeal

On the other side of the Capitol, Senate Republican leaders’ sudden decision to add a partial Obamacare repeal to their bill has energized Democratic opposition.

“You don’t fix the health insurance system by throwing it into a tax bill and causing premiums to go up 10 percent,” Senator Sherrod Brown, an Ohio Democrat, told reporters Wednesday.

Were the ACA’s insurance mandate repealed absent a new policy to compel the purchase of coverage, the CBO projects that premiums would rise 10 percent for people who buy insurance on their own and more than 13 million Americans would lose or drop their coverage.

But a reduction in the number of people with insurance also translates to less taxpayer money spent to provide subsidies for premiums under the ACA. Ending the requirement as of 2019 would save the government an estimated $318 billion, helping to offset the cost of lowering the corporate tax rate.

In addition, the Senate’s tax plan could trigger sharp cuts to Medicare and other programs in order to meet budget deficit rules, according to CBO.

Easy Ads

The move to target Obamacare comes after Republicans lost elections in Virginia and other states earlier this month. Health care was a significant factor in those races and Republicans will face punishing campaign ads if they try to chip away at Obamacare or end the medical-expense deduction while cutting taxes, said political analyst David Axelrod, a former top adviser to President Barack Obama.

“The thing that makes it more of a potent issue is that it’s all being done to facilitate what essentially is a massive corporate tax cut and an individual tax cut that’s skewed to wealthy Americans,” he said in an interview. “You don’t have to work very hard to make those ads.”

The White House argues that the ACA’s insurance mandate isn’t popular and disproportionately affects low- and middle-income Americans who are forced to buy insurance that may be more expensive than they can afford.

“The President’s priorities for tax reform have been clear from the beginning: make our businesses globally competitive, and deliver tax cuts to the middle class,” White House spokesman Raj Shah said in a statement. “He is glad to see the Senate is considering including the repeal of the onerous mandates of Obamacare in its tax reform legislation and hopes that those savings will be used to further reduce the burden it has placed on middle-class families.”

‘Cut Top Rate’

Trump, though, has said proceeds from repealing the insurance mandate should be used to cut taxes even further for wealthy people.

“How about ending the unfair & highly unpopular Indiv Mandate in OCare & reducing taxes even further?” Trump said Monday in a tweet. “Cut top rate to 35% w/all of the rest going to middle income cuts?”

Like Republicans’ failed attempts to repeal the ACA, the tax plan is amassing a growing list of opponents from the world of medicine.

Insurers, hospital groups and disability advocates have spoken out forcefully against the health-care proposals in the bill. Hospitals and insurance groups wrote a letter to Congressional leaders on Tuesday warning of dire health-care outcomes if the tax measure becomes law.

“Repealing the individual mandate without a workable alternative will reduce enrollment, further destabilizing an already fragile individual and small group health insurance market on which more than 10 million Americans rely,” said the letter, signed by six health-care groups, including the American Hospital Association and America’s Health Insurance Plans.